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Enforceability of Releases

A release is an agreement formed between parties where one person gives assent to surrender a legal claim or right to another person against whom the claim or right is enforceable.  Generally, an agreement of release is made in matters of contract or tort.

A release agreement is a contract.  The essentials required for a contract are needed in a release agreement to make it valid.  When an individual with a capacity to understand the legal effects makes a voluntary release in exchange for valuable consideration, the release will be valid.  An agreement of release will only be enforceable if it is valid.

Generally, release agreements are valid and enforceable under circumstances such as:

  • When the attempt to excuse one party from liability is expressed in clear, definite, and unambiguous language in the agreement.
  • When the release is made without any vast disparity of bargaining power between the parties to the agreement.
  • When the release agreement is not contrary to public policy.

Public policy is violated when the release serve two purposes not clearly identified or distinguished; when the release is extremely broad and all inclusive, and when the release is in a standardized agreement printed form, offering no opportunity for negotiation and free and voluntary bargaining.

A release against public policy is void[i].  When a release agreement is given even before a liability arises, it will be considered void because it is against public policy.  When there is a statutory prohibition against relinquishing a certain claim in a state, a release agreement will be against public policy and therefore void.  When a release implicates the public interest and public policy and involves government it will be against public policy[ii].  In cases where a release is executed as a consideration for dismissing pending prosecution, it will be against public policy.  Such a release agreement will be void.

The general rule is that an individual who signs a release has the obligation to read its contents before executing it.  A release cannot be set aside on the basis that the individual creating the release is not familiar with its contents[iii].  However, if a releasor executed a release through fraudulent inducement, failure of the releasor to read the release agreement before executing it is excusable[iv].

If there is sufficient reason that a person was not able to read the instrument before executing it, the release agreement can be set aside[v].

When a person signed a release in an impaired mental condition so that the person was not aware of what s/he was doing, the release agreement will not be enforceable[vi].  If a person is under medication, serious intoxication, or mental distress, the person will have trouble in understanding the effects of his/her actions.  When a release is signed during such times, it will be voidable.

When a release is executed as a result of a mutual mistake that affects both parties’ rights, the release can be set aside[vii].  However, the mutual mistake should be not be made in a fraudulent manner.  There should be evidence to support the fact that the mistake was mutual[viii].  Improvident and inordinate releases can be set aside under equity.  When an individual takes unconscionable advantage of another person’s mistake by misrepresentation or fraud, releases created under such conditions can be avoided or rescinded[ix].  The mistake made should relate to facts that are material to the release[x].  It should not be a far fetched mistake[xi].

Avoiding releases on the basis of mutual mistake could be based on the finding of unknown injuries.  However, if the parties to the release have agreed upon the settlement in consideration of possible unknown injuries, the release would be binding on the parties[xii].  A release of claim for known personal injuries cannot be set aside on the ground that the injuries were more serious than that at the time of executing the release.

When fraud was used to obtain a release, it can be set aside.  Signatures obtained through the use of fraud void a release[xiii].  However, releases executed by fraudulent inducement make the release voidable on producing proof of fraud.  A release executed under duress or undue influence is void or voidable[xiv].

A voidable release can be ratified and affirmed by subsequent actions of the releasor.  Ratification must be done by persons having a reasonable mental state.  The person should intend ratification of the release[xv].

[i] Vodopest v. MacGregor, 128 Wn.2d 840 (Wash. 1996).

[ii] Pearce v. Utah Ath. Found., 2008 UT 13 (Utah 2008).

[iii] Smith v. Flint School Dist., 80 Mich. App. 630 (Mich. Ct. App. 1978).

[iv] Myers v. Fleetwood Farms, Inc., 176 Kan. 508 (Kan. 1954).

[v] Cate v. Dover Corp., 790 S.W.2d 559 (Tex. 1990).

[vi] Hick v. Thomas, 90 Cal. 289 (Cal. 1891).

[vii] Scotts Co., LLC v. Ace Indem. Ins. Co., 2007 NY Slip Op 52542U (N.Y. Sup. Ct. 2007).

[viii] Sweeney v. Taco Bell, Inc., 824 S.W.2d 289 (Tex. App. Fort Worth 1992).

[ix] Terre Haute Cooperage v. Branscome, 203 Miss. 493 (Miss. 1948).

[x] Reinhardt v. Wilbur, 30 N.J. Super. 502 (App.Div. 1954).

[xi] Lister Electric, Inc. v. Cedarhurst, 108 A.D.2d 731 (N.Y. App. Div. 2d Dep’t 1985).

[xii] Application of Larson, 228 Minn. 216 (Minn. 1949).

[xiii] Lewis v. Mathes, 161 Ohio App. 3d 1 (Ohio Ct. App., Washington County 2005).

[xiv] 2 Broadway LLC v. Credit Suisse First Boston Mortg. Capital LLC, 2001 U.S. Dist. LEXIS 4875 (S.D.N.Y. Apr. 20, 2001).

[xv] Mensforth v. Chicago Brass Co., 142 Wis. 546 (Wis. 1910).

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